Chapter in Book

The tragic events in our post 9/11 world disguise the fact that Islam and the West have actually been in a symbiotic relationship over the very long period. Cross-cultural institutional borrowing has constituted a major component of this symbiosis. I intend to focus in this paper on the way these civilizations borrowed important economic institutions from each other. The paper will start with a brief theoretical model explaining the process of cross-cultural institutional borrowing. This will then be followed by an account of the economic institutions actually borrowed.

It is well to begin with the statement that there is yet no agreed definition of sustainable development. For, it is an emerging concept attempting to assimilate the dynamism of a process of change that cannot ignore local concerns, needs, and interests. Being relatively new, it evolves as we learn to grasp its wider implications for different aspects of our lives. The key question here is: what it is that we want to sustain.

Merchants in every civilization operate within specific institutional frameworks, which determine their relative efficiency and their transaction costs. It can be argued that a more advanced and efficient institutional framework leads to lower transaction costs and lower transaction costs, in turn, lead to higher competitiveness. Merchant privileged to operate within an institutional environment allowing lower transaction costs simply can compete better and drive their competitors, operating at higher transaction costs, out of international markets.

Good corporate governance practices are a trademark of developed capital markets. Stringent regulation of capital markets is not a consistent way to mitigate financial mishaps in developed market environment. Malaysian government has adopted a market deregulation approach, and delegated the responsibilities of ensuring a fair and proper functioning of financial institutions to the Securities Commission. The commission is required to issue listing requirements for public and listed companies to establish audit committees. This paper discusses the Malaysian audit committees' duties from the legal perspective. The discussion covers audit committee's fiduciary duties, duty to be diligent, duty of care and skill and statutory duties which are framed in order to make the functioning of Audit committees more effective.

This chapter examines the role of Islam in the economic development of Malaysia, one of the most economically developed Muslim nations and one of the most successful in effecting Islamic institutional reforms.

Islamic capital market products have developed enormously in recent years, with seven major types of sukuk and issuance in four currencies and by ten countries. Much has been achieved since 2000 and many lessons have been learnt. The industry has not suffered the types of setbacks experienced by conventional asset-backed securities, many of which, following the subprime debacle, are now worthless. Yet those involves in sukuk issuance cannot afford to be complacement, as there are many unresolved issues. The aim here is to consider these issues and assess where the industry is going

This book consists of eleven selected research in accounting issues, which are looking from Malaysian context. The issues are ranging from attributes of ethical practices as part of management control system and practices, issues related to external auditing and board of directors (BOD) as corporate governance mechanisms, performance management systems design, use and development status, security threats of computerised accounting information system (CAIS) and urgent needs for the knowledge and applications of Syari'ah based Accounting (SbA) as Islamic Capital Market (ICM) is rapidly developing throughtout the world, including Malaysia.

The efforts towards better corporate governance practices of firms in the Malaysian capital market were started by the Securities Commission (SC) as early as 1996 in three-phased shift disclosure-based regulations (DBR). During Phase 1 (1996-1999: Flexible/Hybrid Merit Based Regime), the emphasis was to regulate on disclosure, due diligence and corporate governance. Phase 2 (January 2000: Partial DBR) still focused on corporate disclosure, due diligence and corporate governance, but included focus on promotion of accountability and self-regulation. In Phase 3 (2001 onwards: Full DBR) the SC enforced high standards of disclosure, due diligence and corporate governance as well as exercise of self regulation and responsible conduct.

The paper assesses empirically the inflation-hedging properties of gold and, as comparison, of the stock market for Malaysia using montly data from July 2001 to May 2007. The results provide clear evidence that, over the sample period, gold serves as a good inflationary hedge. However, the hedging value seems to be lacking in stock prices. More specifically, from regression analyses, we note that gold provides a good hedge over all investment horizons considered and with better hedging at longer horizons. Moreover, from the VAR-based impulse response functions, the return on gold investment seems to increase immediately in response to inflation shocks. For the stock return, we find no evidence of its significant relation or significant response to inflation regardless of the horizons used to compute stock return and inflation.

Over the last few decades, a sizeable number of studies have examined the relationship between audit pricing model and corporate governance characteristics in developed economies (O'Sullivan and Diacon, 1994; Short et al., 1999; Peel & Clatworthy, 2001; Clatworthy & Peel, 2006; Yatim et al., 2006). The Cadbury Report (1992) viewed the auditor's report as "one of the corner stones of corporate governance". Peel and Clatworthy (2001) highlights that audit report contribute significantly towards "effective governance of modern corporations".

Private equity investment is potentially an important component of any wealth management strategy, and it is an asset class which because of its nature and potential double digit returns has enormous potential appeal to investors concerned with Shariah compliance. Islamic finance is about participation in and the sharing of risk, which corresponds very closely with the aim of private equity finance. Equity investors can of course suffer losses, but to date the record of Shariah compliant private equity compares favourably to its conventional counterpart, perhaps because less or, even in some cases, no borrowing is involved.

The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol (an international and legally binding agreement to reduce greenhouse gases, emissions worldwide) allowing industrialised countries with a greenhouse gas reduction commitment (called Annex 1 countries) to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries. The most important factor of a carbon project is that it establishes that it would not have occurred without the additional incentive provided by emission reductions credits.

The world price of rice in 2008 reached its highest record last May but declined in August in the same year. The storm clearly caused a global panic about a rice shortage, which led several producing countries including India, Vietnam and Egypt to bar rice exports. Can we get past 2008 hangover safely, or is there another storm brewing. Rising prices and a growing fear of scarcity have prompted some of the world's largest price producers to announce drastic limits on the amount of rice they export. The price of rice, a staple in the diets of nearly half the world's population has almost doubled on international markets in the last three months.

Philanthropic foundations are known in the Islamic world as waqf or habs. Whereas the latter term is used in North Africa and has also entered into the French language, the former is known, with slight variations, in the rest of the Islamic world and has entered into English. The word waqf (pl. awqaf) is derived from the Arabic root verb waqafa, which means to cause a thing to stop and stand still.

Islamic economists are credited with taking an ethical approach to the subject of economics, emphasizing social justice and equality. These writers are producing a growing volume of literature, the emergence of which raises critical questions. First, what is distinctive about this literature, and to what extent does it represent a coherent body of ideas? ...

According to proponents of Gold Dinar particularly Meera and Aziz (2002), termed as Dinarists, the fiat monetary system is inherently unstable. In providing an empirical perspective on this contention, this paper investigates monetary dynamics of a Muslim economy, Malaysia. To this end, the paper adopts a vector autoregressive (VAR) framework to document dynamic interactions between money supply and various macroeconomic variables including real output, price level, interest rate and stock prices. The results seem to provide some support for the Dinarists' contention. First, the results portray clearly an important causal role of money supply for other macroeconomic variables. Second, we document some evidence that expansion in money supply is inflationary. Lastly, money supply ,interest rate and money supply stock price interactions are destabilizing. More importantly, expansion in money supply has the potential of breeding asset price bubbles. However, apart from the above findings, we also find that money supply reacts positively to increase in real output. Since the accommodative role of money supply is necessary or a pre-condition for expansion in production, arguments for Gold Dinar need to be qualified. Moreover, the viability of Gold Dinar comes into question when political and international aspects of monetary standards are considered.

There are two basic approaches to Islamic economics and finance: Shari' ah compliant and Shari'ah based. The former is relatively easy and therefore dominates. It involves looking at the West for viable economic or financial institutions and instruments. After identifying these, it reverses engineering and dismantles them into their essential components. This is followed by the introduction of additional transactions, trying to make each component comply with the Shari'ah. It can then claim to have invented a new instrument that is Shari'ah compliant.

Islamic banks have enjoyed considerable success during the last three decades in establishing retail branch networks to serve their national markets. They have been able to attract deposits from the pious, who feel uncomfortable in dealing with conventional riba based banks. Prior to the emergence of Islamic banks, many Muslims had little choice other than to open current accounts with conventional banks, but most avoided savings account on which interest accrued.

This chapter examines the experience of Islamic banking in the United Kingdom since 1980, focusing onwholesale operations, retail saving and investment products and home finance. Regulatory and legal issues are discussed, as well as institutional developments and the challenges of serving the British Muslim community of over 1.8 million people. The operations of exclusively Islamic banks are examined, notably the Al Baraka International Bank during the 1980s and early 1990s and the Islamic Bank of Britain from 2004. The activities of conventional banks offering Islamic facilities are also analysed, the focus being on the United Bank of Kuwait and its successor the Al Ahli United Bank, and more recently HSBC through its Amanah Islamic finance subsidiary and Lloyds TSB.

Purpose - To reopen for discussion the issue of credit creation and control in the area of Islamic banking. Design/methodology/approach - In view of a rapid expansion of Islamic banking in recent decades, the answer to questions whether Islamic banks can create credit like mainstream banks and, if yes, what methods central banks could use to control it in their case is of paramount importance. An overview of the literature on the subject is provided and credit creation process is explained as background material for the discussion. Findings - The literature on the subject is scanty, controversial and inconclusive. One reason seems to be the mismatch between structural design of Islamic banks and the objectives they are supposed to meet. It is concluded that Islamic banks can create credit in the usual manner but central banks will have to design new tools for credit control applicable to Islamic banks. Research limitations/implications- It is not a rigorous analytical exercise as the main purpose of the paper is to reopen an important issue for discussion. It is an opinioned work and presents rather tentative answers to the questions raised. Practical implications - The findings of the paper may have serious implications for the current structure of Islamic banks and the legal framework for regulating their credit creation activities. Originality/value - The paper draws attention to a rather neglected issue in Islamic banking and offers guidelines to resolve it.